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Murdoch's ruthless streak may prove to be his own undoing

Ian Verrender

Rupert Murdoch ... "The scandal couldn't have come at a worse time for News Corp." Photo: AP

A week ago it would have seemed unthinkable: that a 13-year-old schoolgirl, murdered almost a decade ago, could have brought one of the world's wealthiest individuals and his hugely powerful corporate machine to task.

But the scandal over illegal phone tapping, resulting in the spectacular closure of the News of the World, now threatens not only to derail Rupert Murdoch's plan to dominate British broadcasting but his determination to cede his iron grip on the company to his heirs.

A day after it was revealed Milly Dowler's phone had been hacked, potentially interfering with police investigations into her murder, revelations surfaced that phones belonging to the parents of two 10-year-old murder victims were also illegally tapped. It then transpired that relatives of dead servicemen in Iraq and Afghanistan had also been targeted.

The House of Commons exploded into uproar over the revelations, questioning whether Murdoch was a ''fit and proper'' person to dominate the British media, while the communications regulator Ofcom announced it was maintaining a close eye on developments.

It couldn't have come at a worse time for News Corp, given Friday was the government's deadline to give the all-clear to the company's $13 billion year-long tilt to take full control of pay television operator BSkyB.

Murdoch's London tabloid News of the World has been embroiled in accusations of phone tapping and entrapment for years.

Its regular fodder of royal scandal and celebrity sex romps, however, merely served to titillate readers and boost circulation, with the resulting defamation settlements considered a worthwhile investment.

But tapping into the private lives of murdered children and the grief of their parents has sent shivers through the nation and across the world.

Even Rupert was forced to denounce the latest ''allegations'' as ''deplorable and unacceptable''; an interesting use of language given the company already has admitted to both the bugging and bribing police.

Murdoch is an extraordinary character; brilliant, tenacious and with an unswerving determination to succeed. But that ruthless streak, which has helped him expand his business empire from a newspaper in Adelaide to dominate global media, has fostered an internal culture that has replicated his personal mantra as a recipe for success and venerated him as a modern-day messiah.

That he and his family have maintained their grip over the company, with less than 15 per cent, is testament to his finely honed strategic skills.

Even before this latest scandal, however, Murdoch and his family have been the target of a festering discontent among some News Corp shareholders after several years of hugely expensive deals that have not delivered.

Had he been running almost any other company, or been an outsider appointed to News by the board, Murdoch's job would be on the line.

A week ago, News dumped MySpace, racking up a huge loss. Its much vaunted entry into the world of social media, News bought Myspace in 2005 for $US580 million, confidently predicting it would have annual revenues of a billion dollars within a few years.

It sold the operation late last week for just $US35 million, after spending almost six months looking for a buyer to rid itself of what it now admits was a drag on earnings.

Then there was the purchase of The Wall Street Journal at the top of the market. In 2007, News bought Dow Jones, the company that owns The Journal, for $US5 billion, a price that even the controlling Bancroft family found too good to refuse.

Within months the financial crisis was in full swing, crippling the economies of the developed world. It made great copy but it did little to help the purchase pay for itself.

Add to that the global revolution in advertising, which has seen revenues migrate away from newspapers to websites, and The Journal no longer seems the bold and inspired purchase it once appeared.

Still, there's no denying Murdoch's grand vision for media integration and his ability to translate that into reality.

Take this quote from an interview in the Financial Times in 2002: ''We start with the written word. Then we get to TV, originally with the idea that it will protect the advertising base, and it then progresses into a medium of its own with news, programmes and ideas.

''You then look at TV and you say: 'Look, we don't want to just buy programmes from a Hollywood studio, we'd better have one.' Then comes the issue of people who are going to deliver your programmes. Cable is consolidating … Instead of having 20 gatekeepers, you are going to have three or four. For content providers, that is very bad news. So, you try to protect yourself in having some distribution power.''

With such a grand expansion strategy and a vision for domination, it would have to be expected that mistakes, such as Myspace, would be made.

But Murdoch's obsession for family domination of the media giant has led him into some awkward situations.

His decision to pour the best part of a billion dollars into telephone start-up One.Tel back in 2001 raised eyebrows. Whatever compelling business reasons there were for the investment were overshadowed by the fact that it was a personal venture for his eldest son Lachlan and his close friend James Packer.

To his credit, Murdoch senior apologised to shareholders for the folly that One.Tel became and noted that both he and his son had learnt from the experience.

But this year News Corp purchased the British television production company Shine. A leading producer of reality shows like The Biggest Loser, MasterChef and One Born Every Minute, it would seem a perfect fit for a company like News.

Except that Shine was owned by Rupert's daughter Elisabeth. And the $675 million price tag caused many News investors to gag, prompting several to launch legal action that accused Rupert of treating News Corp ''like a wholly owned family candy store''.

As part of the deal, Elisabeth was elevated into News Corp's upper management ranks, catapulting her into the role of contender to take over the running of the media colossus.

As of this week, the favourite was still James Murdoch, who engineered the BSkyB acquisition and has been steering it through the final regulatory hurdles. But he too has been tarnished by the phone tapping scandal, accused in the House this week by a Labour backbencher of orchestrating a cover-up by ordering the destruction of data at an Indian IT centre.

It's the sort of story that would have made a ripping yarn in News of the World.

9 Jul
London: The senior detective leading the News of the World phone hacking inquiry says there are 4000 possible victims of phone hacking listed in the pages of private eye Glenn Muclaire's notebooks and they were being contacted ''as quickly as possible''.